Brookfield Renewable A Leader in Renewable Power Generation Ontario, Quebec, Electricity and Climate Change: Advancing the Dialogue HEC Montreal, April 10th, 2015 Enhancing transmission infrastructure development in a carbon reduction era
Brookfield Renewable A Leader in Renewable Power Generation
Ontario, Quebec, Electricity and Climate Change: Advancing the Dialogue
HEC Montreal, April 10th, 2015
Enhancing transmission infrastructure development in a carbon reduction era
22CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements and information, within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of Section27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, “safe harbor” of the United States Private SecuritiesLitigation Reform Act of 1995 and in any applicable Canadian securities regulations, concerning the business and operations of Brookfield Renewable. Forward-looking statements mayinclude estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Forward-looking statements in this presentationinclude statements regarding the quality of Brookfield Renewable’s assets and the resiliency of the cash flow they will generate, Brookfield Renewable’s anticipated financialperformance, future commissioning of assets, contracted portfolio, technology diversification, acquisition opportunities, expected completion of acquisitions, future energy prices anddemand for electricity, economic recovery, achievement of long term average generation, project development and capital expenditure costs, diversification of shareholder base, energypolicies, economic growth, growth potential of the renewable asset class, the future growth prospects and distribution profile of Brookfield Renewable and Brookfield Renewable’saccess to capital. Forward-looking statements can be identified by the use of words such as “plans”, “expects”, “scheduled”, “estimates”, “intends”, “anticipates”, “believes”, “potentially”,“tends”, “continue”, “attempts”, “likely”, “primarily”, “approximately”, “endeavours”, “pursues”, “strives”, “seeks”, or variations of such words and phrases, or statements that certainactions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Although we believe that our anticipated future results, performance or achievementsexpressed or implied by the forward-looking statements and information in this presentation are based upon reasonable assumptions and expectations, we cannot assure you that suchexpectations will prove to have been correct. You should not place undue reliance on forward-looking statements and information as such statements and information involve knownand unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance orachievement expressed or implied by such forward-looking statements and information.
Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: our limited operating history;the risk that we may be deemed an “investment company” under the Investment Company Act; the fact that we are not subject to the same disclosure requirements as a U.S. domesticissuer; the risk that the effectiveness of our internal controls over financial reporting could have a material effect on our business; changes to hydrology at our hydroelectric stations or inwind conditions at our wind energy facilities; the risk that counterparties to our contracts do not fulfill their obligations, and as our contracts expire, we may not be able to replace themwith agreements on similar terms; increases in water rental costs (or similar fees) or changes to the regulation of water supply; volatility in supply and demand in the energy market;exposure to additional costs as a result of our operations being highly regulated and exposed to increased regulation; the risk that our concessions and licenses will not be renewed;increases in the cost of operating our plants; our failure to comply with conditions in, or our inability to maintain, governmental permits; equipment failure; dam failures and the costs ofrepairing such failures; exposure to force majeure events; exposure to uninsurable losses; adverse changes in currency exchange rates; availability and access to interconnectionfacilities and transmission systems; health, safety, security and environmental risks; disputes, governmental and regulatory investigations and litigation; local communities affecting ouroperations; losses resulting from fraud, bribery, corruption, other illegal acts, inadequate or failed internal processes or systems, or from external events; risks relating to our reliance oncomputerized business systems; general industry risks relating to operating in the North American, Brazilian and European power market sectors; advances in technology that impair oreliminate the competitive advantage of our projects; newly developed technologies in which we invest not performing as anticipated; labour disruptions and economically unfavourablecollective bargaining agreements; our inability to finance our operations due to the status of the capital markets; the operating and financial restrictions imposed on us by our loan, debtand security agreements; changes in our credit ratings; changes to government regulations that provide incentives for renewable energy; our inability to identify sufficient investmentopportunities and complete transactions; risks related to the growth of our portfolio and our inability to realize the expected benefits of our transactions; our inability to develop existingsites or find new sites suitable for the development of greenfield projects; risks associated with the development of our generating facilities and the various types of arrangements weenter into with communities and joint venture partners; Brookfield Asset Management’s election not to source acquisition opportunities for us and our lack of access to all renewablepower acquisitions that Brookfield Asset Management identifies; our lack of control over our operations conducted through joint ventures, partnerships and consortium arrangements;our ability to issue equity or debt for future acquisitions and developments will be dependent on capital markets; foreign laws or regulation to which we become subject as a result offuture acquisitions in new markets; and the departure of some or all of Brookfield’s key professionals.
We caution that the foregoing list of important factors that may affect future results is not exhaustive. The forward-looking statements represent our views as of the date of thispresentation and should not be relied upon as representing our views as of any date subsequent to April 10, 2015, the date of this presentation. While we anticipate that subsequentevents and developments may cause our views to change, we disclaim any obligation to update the forward-looking statements, other than as required by applicable law. For furtherinformation on these known and unknown risks, please see “Risk Factors” included in our Form 20-F.
3Brookfield Asset Management – Experienced Investor and Manager
Leader in alternative investing across major asset classesthat are in demand by institutional investors seeking yield andsuperior returns
PROPERTY RENEWABLE POWER INFRASTRUCTURE PRIVATE EQUITY
$126 billion $20 billion $32 billion $21 billion
~350 million sq. ft1:office, retail,
opportunity and financial investments
234 generating facilities,~6,700 MW, 85% hydro
Ports, rails, toll roads, natural gas pipelines,
transmission lines, timber and agrilands
Special situations and residential
development
1) Includes active developments and current projects in planning
Real AssetsReal ReturnYield EnhancedFixed Income Alternatives
4
HYDROELECTRIC GENERATION
$20BPOWER GENERATING ASSETS
234 generating facilities
85%HYDROELECTRIC GENERATION
Situated on 72 river systems
~6,700MEGAWATTS OF CAPACITY
13 markets in 5 countries
* $1 billion liquidity as of Sept 2014
About Brookfield Renewable Energy Partners
One of the largest public pure-play renewable power businesses in the world
100 years of experience in power generation
Over 1,400 employees with strong operating, regulatory and power marketing experience
Poised to grow with approx. $1 billion available to invest
5Brookfield in Québec
Masson Hydro Facility, Québec High Falls Hydro Facility, Québec
6 HYDROPOWER FACILITIES ON 3 RIVER SYSTEMS
INSTALLED CAPACITY OF 291 MW
ENOUGH ELECTRICITY TO POWER ABOUT 135 000 HOMES PER YEAR
DIRECTLY CONNECTED TO THE ONTARIO GRID VIA 115 KV AND 230 KV LINES
GENERATION: 1,714 GWH
STORAGE: 584 GWH
6Obstacles to Regional Collaboration
Ontario Challenges Quebec Challenges
Each jurisdiction has distinct characteristics, needs and market structures which prevents fluidity of various electricity products. While there is a willingness to collaborate, very little tangible action is actually contemplated by each province, as both are focused on protecting their respective economic interests.
Increasing capacity deficit during peak winter months
Absence of long-term contracting opportunities to foster surpluses
HQ-Production limited exports sales→ Lack of new interconnection capacity for
export during non-winter months→ New infrastructure development still facing
opposition and market hurdles→ Low shale gas pricing environment will
continue to negatively affect export revenues
Lack of recognitions of hydro generation environmental benefits to the region
Tight reserve margins→ Coal baseload shutdown → Possible capacity shortage as early as
2017-18→ Long term planning predicated upon
nuclear refurbishment and conservation → Scope of nuclear refurbishment is
unprecedented (Darlington 1-4: ~4,000 MW/Bruce 3-8: ~4,500 MW)
New intermittent resources to likely exacerbate balancing needs and pressure retail rates upward
Hybrid market structure has not provided all the benefits initially expected
1.
2.
3.
1. 2. 3.
4.
7
Ontario ratepayers have paid for 6,300 MW of transmission infrastructure with neighboring jurisdictions.
Those interties are capable of providing short term energy balancing as well as long term capacity and renewable energy needs.
Today, the province only uses its 6,300 MWs of existing infrastructure for short term energy balancing needs.
Ontario: Interconnections with neighboring areas
Into OntarioManitoba 330Minnesota 90Michigan 1580New York 1520Quebec 2788Total 6308
Source: IESO
8Quebec: Energy, capacity, and interconnections (2013)
2 G
W
1.1
GW
27
129
Peakdemand
(GW)
Energy(TWh)
ISO-NE
33
163
Peakdemand
(GW)
Energy(TWh)
NY ISO
24
144
Peakdemand
(GW)
Energy(TWh)
ON
6 25
Peakdemand
(GW)
Energy(TWh)
NB & NL
38
186
Peakdemand
(GW)
Energy(TWh)
QC
NY
NE
NB
NL
Source: Transenergie, HQD, NYISO Gold Book, ISO-NE Load Forecast, NB 10-year power plan, NL Electricity Demand Forecast
9Recent Positive Initiatives
Tight reserve margins and capacity deficit
Lack of recognition of environmental benefits
ON/QC seasonal 500 MW capacity swap
Unofficial discussion between provinces for long-term supply arrangement as replacement alternative to nuclear
refurbishment
Lack of export capability
Public willingness from Ontario to consider clean hydro imports if provide system benefits and are cost effective to
the rate-payer
Ontario contemplating implementing Cap & Trade program in the near future (linked with QC and CA WCI program)
Absence of long-term contracting opportunities QC publicly stated willingness to sign new long-term PPA
QC publicly stated willingness to commit to the development of new interconnection capacity
… but opposition still persists in the Northeast…
Challenges… … Recent Initiatives
10New England Case: Overview of the current renewable goals
Attrition, including the recent Cape Wind PPA termination, has created a shortfall of over 2 TWh against near term Class I REC targets. By 2030, an additional 10 TWh will be required to meet Class I targets.
94
84
2820
71
19
12
0-30
10
20
30
40
50
60
70
80
90
100
1990 2010 2020 2050M
MTC
O2e
Total Emissions (Acutal)Power Sector Emissions (Actual)Total Emissions (Target)Power Sector Emissions (Target)
Renewable Portfolio StandardsClass I
Source: BNEF (2014) H2 2014 US REC Market Outlook
Global Warming Solutions Act – MA
Source: MA’s GWSA and MA’s Clean Energy and Climate Plan for 2020.
+ 10 TWh is needed between
2016 – 2030 to meet goals
Total of 40-60 TWh of non-emitting energy
by 2050
11
0
200
400
600
800
1000
1200
1400
1600
2015
2016
2017
2014
2015
2016
2017
2018
2019
2015
2017
2016
2018
2019
CT MA ME NH VT
Cap
acity
(MW
)
Biomass Water Wind
New England case: Environmental Supply from familiar places
Continued access to Class I RECs will require additional transmission infrastructure to access new renewable resources.
Source: ISO-NE, 2015 Source: ISO-NE, December 2014, PAC Wind Integration Analysis
Transmission Constraints in MaineISO-NE Queue> 3,700 MW of new wind in Maine
“The replacement of large synchronous machines with wind generation in Maine would cause stability problems necessitating the addition of about 500 MVAR of dynamic reactive support in Central Maine”
12
MA CT RI
Joint RFP soliciting:2 TWh of incremental Class I Resources & Large Hydro
New Transmission
NESCOE / Regional Energy Procurement Initiative
• Implemented in 2009, the New England States Committee on Electricity (NESCOE) is a not-for-profit FERC-approved Regional State Committee, representing the collective interests of all 6 New England (NE) States in securing long term, renewable, non-emitting generation via coordinated procurement.
• With the support of all NE Governors and the active involvement of ISO-NE, NESCOE has been very active and engaged with all stakeholders for preparing the landscape for long-term joint-procurement. In Feb 2015, three of the six states released a joint draft RFP.
Such regional initiative could result in removing from the Northeast energy markets some of the most economic, low carbon resources currently available, to the potential future detriment of Ontario rate payers among others.
13Proposed Transmission Projects
Major New England IOUs, as well as ITCs, are competing aggressively to site and develop large scale transmission solutions in light of clean energy & infrastructure challenges in the region – but resources from NY and within New England provide competitive solutions.
Map Source: Adapted from ISO-NE (2014). 2014 Regional System Plan
Representative Projects and Concept ProposalsA Northern Pass—Hydro-Québec/ Northeast UtilitiesB Northeast Energy Link—Emera Maine/National GridC Green Line—New England ITCD Bay State Offshore Wind Transmission System—AnbaricE Northeast Energy Corridor—Maine/New Brunswick/Irving F Muskrat Falls/Lower Churchill—Nalcor EnergyG Maine Yankee—Greater BostonH Maine—Greater BostonI Northern Maine—New EnglandJ Plattsburgh, NY—New Haven, VTK New England Clean Power Link— TDI NewL NY—MA (not in original ISO-NE report)
L
60 mi
25 mi
190 mi 150 mi
Length of transmission lines is major
cost factor
14Wind-only or bundled wind & hydro solution?
Bundling wind and hydro provides more value to the ratepayer, and lowers the net energyprice to load (incremental regional benefits)
Non-emitting energy Class I RECs
Bundled wind and hydro over new transmission
Wind-only over new transmission
3 x more non-emitting energy Class I RECs
Significant incremental capacity Reduced operational complexity High delivery factor Reduces natural gas dependency Resource diversification
+
Leverage existing hydro for a more cost effective solution
15
Draft Plan - BSER and State-specific
emission goals
Final Rule (summer 2015)
State Compliance Plans
(2016-2018)
• The state (or multiple states) develop(s) a plan to meet the emission goal set by the EPA.
• The plan can be based on the EPA’s BSER or other measures as long as the state meets the goal.
• The EPA proposes that all actions within the state plan become federally enforceable.
Interim compliance
period(2020-2029 avg.)
Final Compliance(2030 onward)
EPA’s Clean Power Plan: Potential Game Changes
The EPA states that by 2030, it will reduce the US carbon dioxide emissions from the existing power fleet by 30% (compared toa 2005 baseline). The EPA calculates an emission target for each state using the BSER, and the states can meet the targets (rate or mass based) by imposing direct emission limits on effected units or by using a portfolio approach (as currently written).
Verification/ Enforcement
2014
-201
520
16-2
018
2020
-202
920
30 **
* The EPA has solicited comments on practically all aspects of the process and timeline. Delays are expected to the timeline.
** An alternate, less stringent, compliance period would be between 2020-2024,with final goals met in 2025
EPA’s mandate
State’s mandate
Target a 30% reduction of CO2
emissions nationwide
16Key Takeaways
There is no easy, simple and low risk solution for achieving carbon goal targets while optimizing and enhancing energy markets in a regional collaborative spirit
Achieving a consensus on a national long-term energy vision among regional partners, while being challenging, remains essential for capturing full spectrum of benefits and securing future energy landscape
Hydro generation should be fully recognized for the benefits provided on the environmental and reliability fronts
Harmonization of carbon management programs and independent accounting for utilities are critical items for meeting long term targets
Overdependence to natural gas current low prices environment should be avoided
Political deciders and regulators should recognize benefits of long-term procurement initiatives as part of a sound risk management strategy to enhance the development of new transmission infrastructures
While Ontario has been slow to include clean energy imports in its supply plan in the past, this reluctance appears to be shifting in the face of the overwhelmingly compelling arguments in its favor